The Vital Role of Gas Tax Indexing

Without an automatic adjustment for gas taxes, revenue from the tax declines due to increasing fuel efficiency standards while road maintenance and construction costs increase due to inflation. Witness Wisconsin's woes.
July 18, 2017, 10am PDT | Irvin Dawid
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Daniel Korzeniewski

Like most states, Wisconsin relies to a great extent on user fees, particularly the gas tax, to fund its roads. [How does your state pay for its roads?]

But that share has been declining since the legislature abolished the practice of automatically adjusting its gas tax in 2006, now stuck at 32.9 cents per gallon for over 11 years.  [When did your state last increase its gas tax?]

Furthermore, it's not only causing transportation headaches for the legislature, it's also holding up the budget process, reports Marti Mikkelson for WUWM (Milwaukee Public Radio–listen here).

“Up until that point, there had been an automatic increase based on several different variables and there was always a little more money coming in. Once you eliminated those automatic increases, then you essentially ended up with a stagnant revenue pool,” Wisconsin Taxpayers Alliance spokesman David Callende says.

Republican Gov. Scott Walker has not been helpful. "When he took office in 2011, he made it clear, that there would be no increases in registration fees -- or gas taxes -- in his budgets," adds Mikkelson.

Unlike some states, like California, where hiking taxes often comes down to a partisan divide, in Wisconsin, a Republican trifecta, an "ideological split between the GOP leaders in the Assembly and Senate complicates the search for answers," according to JR Ross of wispolitics.com.

Two user fees not taken off the table are adding road tolls near the state borders, with the idea of catching out-of-state motorists, and adding a vehicle-miles-traveled fee for heavy trucks, aka weight distance tax, both described here last month.

A proposal to add a sales tax to fuel purchases and reduce the gasoline excise tax posted in May apparently failed.

Wisconsin has plenty of company

According to a June 28 publication by the Institute on Taxation and  Economic Policy (ITEP), "thirty states and the federal government levy fixed-rate gas taxes where the tax rate does not change even when the cost of infrastructure materials rises or when drivers transition toward more fuel-efficient vehicles and pay less in gas tax."

However, it's not always easy legislating automatic increases to the gas tax, as Massachusetts lawmakers discovered in 2014.

Hat tip to AASHTO Daily Transportation Update

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Published on Monday, July 17, 2017 in WUWM (Milwaukee Public Radio)
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